Focus on South American weather

Grabanski is president of Progressive Ag, a Fargo, N.D.-based hedge brokerage firm. Reach him at 800-450-1404.

Wheat: followed row crops with modest gains

The wheat markets gained from 5 to 15 cents last week. The Chicago market had the larger gains because of spillover support from row crops, while the Minneapolis market was kept quiet because of recent snowfall in parts of the spring wheat belt.

Wheat markets had mixed trade on Jan. 28 before closing with small gains. Export inspections for the week ending Jan. 25 were better than recent weeks, but still behind pace. Wheat had support from 8 cent gains in the corn market. Wheat markets had gains for much of the day Jan. 29 before slipping lower to post 2- to 5- cent losses. The Minneapolis market had the larger losses as a result of the heavy, wet snow that fell over parts of the spring wheat region overnight. While snow in January does little to alleviate drought concerns, it does give some peace of mind to worrisome traders.

The wheat markets started the day Jan. 30 with modest gains and finished near their daily highs as a result of support from the strong soybean market and a late rally in the corn market. Rain in much of the Midwest and parts of the hard red wheat belt may have limited the gains in the wheat market, but the western areas where most of the wheat acres are planted remains dry.

Wheat markets traded with losses Jan. 31 in a day full of mixed signals. The lower dollar combined with news of a wheat sale to Taiwan were supportive, but another round of poor weekly export sales numbers squashed that support. Feb. 1 trade had single-digit gains because of support from the row crop markets and a continued slide in the U.S. dollar. The U.S. is becoming more competitive on the export markets and shipping rates are relatively low, but the majority of wheat trade continues to come from plentiful supplies in India.

The U.S. Department of Agriculture reported wheat export inspections pace for the week ending Jan. 25 at 22.3 million bushels. This brings the year-to-date export inspections pace to 584.6 million bushels, compared with 657.6 million at this time last year. With 18 weeks left in wheat’s marketing year, shipments need to average 25.7 million bushels to make USDA’s projection of 1.05 billion. Wheat export sales pace for the week ending Jan. 25 was estimated at 10.8 million bushels. This brings the year-to-date export sales pace for wheat to 760.8 million bushels, compared with 796 million for last year. With 18 weeks left in wheat’s marketing year, sales need to average 15.8 million bushels to make USDA’s projection of 1.05 billion.

Corn: strengthening cash market supportive

For last week, the corn market was up 23 cents in the March contract as of Feb. 1 morning trade. Dry weather in parts of southern Brazil and northern Argentina supported the corn market last week. Support also came from the strengthening cash market in the U.S., where the national average basis strengthened in tandem with the gains in the futures market.

The corn futures closed with green numbers every day last week and double-digit gains on Jan. 30. The South American weather was supportive early last week as the near-term forecast turned drier for Argentina, creating buying interest in the futures. Talk of lower production numbers in South America because of the dryer conditions during pollination offered support. Tight stocks and dry conditions also remain in the western Corn Belt. Additional strength came from the lack of farmer selling and a strong basis. The market saw a better export inspections report last week, but we are still behind, with the cumulative shipment pace at 32 percent of the USDA estimate versus the five-year average of 38 percent.

Not all of the news was positive last week. The Rosario Grain Exchange raised its Argentina corn crop estimate to 26.5 million metric tons versus its last estimate of 24 million. The ethanol report was disappointing for the corn market and margins continue to run in the red. Iowa ethanol margins, while still negative, moved to -30 cents per bushel versus -58 cents for the previous week. While trending in the right direction, this is the 26th consecutive week for negative margins in Iowa. Valero Corp. also shut down three of its 10 plants during the last quarter of last year and there were reports that another six plants from various companies were idled last week. The export sales report was also disappointing and below estimates. Cumulative corn sales stand at 56 percent of the USDA estimate for the current marketing year versus a five-year average of 64 percent. Trade talk is that many doubt exports will make the 950 million bushel estimate set by USDA.

Ethanol production for the week ending Jan. 25 averaged 770,000 barrels per day, down 18 percent versus last year. This was well below market estimates and total ethanol production for the week was 5.4 million barrels. Corn used in production the week ending Jan. 25 is estimated at 80.9 million bushels, down from 83.16 million the previous week. Corn use needs to average 87.1 million bushels per week to meet this crop year’s USDA estimate of 4.5 billion bushels. This crop year’s cumulative corn used for ethanol production is 1.8 billion bushels. Stocks as of Jan. 25 were 20.5 million barrels, up 2.3 percent from last week, but down 1.9 percent from last year.

USDA’s export inspections report was friendly for corn. There were 21.1 million bushels of corn reported shipped, above the 20.8 million needed to meet USDA’s projection of 950 million for the 2012 to ’13 marketing year. This was above the pre-report estimates of 8 million to 15 million bushels. The export sales report for corn was at 7.4 million bushels and below the 13.1 million needed to meet USDA’s projection of 950 million bushels. This was below the estimates of 7.9 million to 15.7 million bushels and bearish for corn. Total shipments last week were at 24 million bushels, above the 20.5 million needed for the 2012 to ’13 marketing year.

Soybeans: exports continue to provide support

As of the Jan. 31 close, March soybeans were up 27.5 cents on the week, while November 2013 soybeans were 24.75 cents higher. South American weather continues to have a strong impact on the market.

The soybean market closed with moderate gains on Jan. 28 and 29 amid a mixed weather forecast in South America. Argentina was dry early in the week, while northern Brazil remained too wet, potentially leading to harvest delays. Export demand remains strong with USDA announcing a sale of 220,000 metric tons of soybeans to China for 2013 and 2014 delivery on Jan. 28. Jan. 28 export inspections were in line with expectations and well above the amount needed to keep pace with USDA’s projection.

The Jan. 29 strong close led to technical and fundamental buying overnight in the soybean complex. Continued weather concerns in South America helped extend the Jan. 30 commercial buying into midday and the close. Logistics concerns were growing in Brazil as shipments got off to a slow start. USDA announced a sale of 175,000 metric tons of soybeans to China for 2013 and 2014 delivery on Jan. 30.

Soybeans closed lower, but near the middle of the day’s trading range on Jan. 31 on profit taking sparked in part by rainfall in Argentina. The extended forecast for South America was essentially unchanged with areas of dryness in Argentina and continued moisture in northern Brazil where wetness is already causing harvest delays. A fifth consecutive higher daily low indicated that the uptrend in the market is intact.

USDA reported soybean export inspections pace for the week ending Jan. 25 at 40.7 million bushels. This brings the year-to-date export shipments pace for soybeans to 950.4 million bushels, compared with 718.4 million for last year at this time. Soybean export sales pace for the week ending Jan. 25 was estimated at 14.2 million bushels, bringing this year’s total to 1.2 billion bushels, compared to 964.7 million bushels last year at this time.

Barley

USDA reported no new export inspections for barley for the week ending Jan. 25. There were no new export sales, but 14,000 bushels were shipped to Taiwan. Jan. 31 cash barley bids in Minneapolis had feed barley at $5.20 per bushel, while malting barley bids were at $7.05.

Durum

USDA reported export inspections of 463,000 bushels for the week ending Jan. 25. Export sales of 400,000 bushels were reported, with shipments of 500,000 bushels. Year-to-date sales are at 16.1 million bushels, up from 14.9 million at this time last year. Jan. 31 cash bids for milling quality durum were at $8.25 per bushel in Berthold, N.D., and $7.95 in Dickinson, N.D.

Canola

Canola futures on the Winnipeg, Manitoba, exchange continued the recent uptrend to post net gains of up to $20 (Canadian) per ton for last week. Harvest delays in northern Brazil and dry weather in southern Brazil and Argentina reignited interest in U.S. oilseed futures, which lent support to canola, which traded above several resistance levels last week. The Canadian dollar is again priced below the U.S. dollar again, making Canadian canola cheaper on the export market. Cash canola bids in Velva, N.D., were at $28.86 per hundredweight on Jan. 31.

Sunflowers

Soybean oil export sales pace for the week ending Jan. 25 was estimated at 20.1 trillion metric tons. This brings the year-to-date total to 733.2 trillion metric tons, compared with last year’s 199.4 trillion. Cash sunflower bids in Fargo, N.D., were at $22.75 per hundredweight on Jan. 31.

Dry beans

Trading activity in the dry bean industry has been steadily quiet. USDA is reporting grower bids of $32 to $33 for pintos and $30 to $32 for navies and blacks in North Dakota and Minnesota.